THQ Reports Record Fiscal 2005 Third Quarter Results

Sales Up 37% to $400 Million; EPS Up 102% to $1.58

News by GamesIndustry International Contributor

Published on Feb. 2, 2005

CALABASAS HILLS, Calif., Feb 01, 2005: THQ Inc. (Nasdaq: THQI) today announced record results for the fiscal 2005 third quarter ended December 31, 2004, driven by multi-million unit sales of games based on The Incredibles, The SpongeBob SquarePants^TM Movie and WWE SmackDown!^TM vs. Raw^®.

Net sales advanced 37% for the third quarter to a record $400.3 million, from $293.1 million in the prior-year period. Net income more than doubled to a record $62.9 million, or $1.58 per diluted share. This included $0.20 per diluted share from research and development tax credits claimed for prior years. This compares with net income of $30.4 million, or $0.78 per diluted share, for the fiscal 2004 third quarter.

For the nine months ended December 31, 2004, net sales grew 13% to $584.8 million from $517.7 million for the same period a year ago. Net income for the first nine months of fiscal 2005 was $52.7 million, or $1.32 per diluted share, which included the tax credit mentioned above. For the nine months ended December 31, 2003, THQ reported net income of $30.4 million, or $0.78 per diluted share.

"Our performance during the holiday quarter far surpassed our original expectations in all major markets," said Brian Farrell, President and CEO, THQ. "The combination of sound strategic positioning for the holidays and solid execution in a highly competitive market drove our exceptionally strong results for the period."

Fiscal year-to-date, THQ shipped more than four million units of The Incredibles, two million units of The SpongeBob SquarePants Movie, two million units of WWE SmackDown! vs. Raw, two million units of Finding Nemo and one million units of SpongeBob SquarePants: Battle for Bikini Bottom^TM. In addition, original properties Tak 2: The Staff of Dreams and Full Spectrum Warrior^TM are approaching shipments of one million units. The company also said that MX Unleashed, launched in February 2004, recently surpassed one million units shipped.

Financial Guidance

THQ confirmed previous guidance for the fiscal fourth quarter and increased guidance for the full fiscal year ending March 31, 2005:

For the fourth quarter of fiscal 2005, the company continues to expect net sales of approximately $165 million and net income of about $0.21 per diluted share.

For the fiscal year ending March 31, 2005, THQ now expects record net sales of approximately $750 million and record net income of approximately $1.53 per diluted share, up from previous guidance of net sales of $680 million and earnings per diluted share of $1.10.

THQ Wireless is expected to contribute approximately $25 million of THQ's net sales in fiscal 2005, up from previous guidance of $20 million.

"We are on track to post excellent results for fiscal 2005," said Farrell. "Our strong portfolio of both licensed and original properties and our world- class product development organization provide the foundation for THQ's long- term success."

Recent Developments:

THQ Delivers Four Multi-Million Unit Titles; Five Titles Exceed One Million Units

Fiscal year-to-date, THQ shipped more than four million units of The Incredibles, two million units of The SpongeBob SquarePants Movie, two million units of WWE SmackDown! vs. Raw and two million units of Finding Nemo.

Fiscal year-to date, THQ shipped more than one million units of SpongeBob SquarePants: Battle for Bikini Bottom.

THQ Games Achieve Critical Acclaim

Warhammer^® 40,000: Dawn of War^TM was named RTS of the Year by Computer Gaming World, and garnered numerous multi-play and genre accolades from leading enthusiast sites.

Full Spectrum Warrior has received several awards and accolades from leading enthusiast sites.

Tak 2 was named Best Platform Game for GameCube^® by IGN.

THQ Wireless Continues to Broaden its Content Portfolio

In December, THQ Wireless announced a multi-year agreement with Lucasfilm Ltd. that grants THQ Wireless worldwide rights to develop and distribute a comprehensive offering of Star Wars branded content for mobile phones.

In November, THQ Wireless launched the most comprehensive suite of officially licensed NBA wireless products to date, including games, fantasy applications, information services, ringtones and graphics, featured in the NBA's new wireless sports package, "NBA Unwired."

THQ's Internal Studios Grow to Ten with Acquisition of Blue Tongue

Consistent with THQ's strategic objective of using internal development to improve product quality and operating margins, the company recently acquired Blue Tongue Entertainment Limited. THQ studio operations now stand at more than 800 people in ten studios.

Investor Conference Call:

THQ management will host an investor conference call today, February 1, 2005, at 2:00 p.m. PST (5:00 p.m. EST) to review the company's financial results and operations for the quarter ended December 31, 2004 and discuss its future outlook. The call may be accessed by dialing (866) 800-8652 domestic or (617) 614-2705 international, access code is 81413837, or by visiting THQ's Web site at www.thq.com.

THQ Inc. (Nasdaq: THQI) is a leading worldwide developer and publisher of interactive entertainment software. The company develops its products for all popular game systems, personal computers and wireless devices. Headquartered in Los Angeles County, California, THQ sells product through its global network of offices located in the United States, United Kingdom, France, Germany, Spain, Korea and Australia. More information about THQ and its products may be found at www.thq.com and www.thqwireless.com. THQ, THQ Wireless, Blue Tongue Entertainment and their respective logos are trademarks and/or registered trademarks of THQ Inc.

This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, the company's expectations for revenue and earnings per share for the quarter and fiscal year ending March 31, 2005 and for the company's product releases and financial performance in future periods. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries (collectively referred to as "THQ") and are based upon management's beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive and technological factors affecting the operations, markets, products, services and pricing of THQ. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties or to revise or publicly release the results of any revision to these forward- looking statements. Readers should carefully review the risk factors and the information that could materially affect THQ's financial results, described in other documents that THQ files from time to time with the Securities and Exchange Commission, including its Quarterly Reports on Form 10-Q and its Annual Report on Form 10-K for the fiscal period ended March 31, 2004, and particularly the discussion of risk factors that may affect results of operations set forth therein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.